NAVIGATING A CHANGING AMERICA The Urban–Brookings Tax Policy Center 2009 Annual Report The Urban Institute, 2100 M Street, NW, Washington, DC 20037 The Brookings Institution, 1775 Massachusetts Ave., NW, Washington, DC 20036 www.taxpolicycenter.org Letter from the Directors It would be an understatement to say that 2009 was an eventful year for the Tax Policy Center. We immersed ourselves in the major tax and fiscal policy issues that arose in the wake of a change in administration, a historic financial collapse, a deep recession, and a massive federal deficit. In this challenging environment, TPC redoubled its effort to provide policymakers, journalists, academics, and citizens with the objective, timely, and accessible analyses needed to evaluate current and emerging tax and fiscal policy issues. As President Obama took office at the beginning of the year and faced the immediate challenge of jump-starting an economy deep in recession, our work became more urgent than ever. We analyzed and evaluated stimulus proposals, wrote background papers, and issued four wave-making report cards on the major provisions of the 2009 economic stimulus plans as the bills wended through the legislative process. We graded the short- and long-term effects of the stimulus on the economy and offered insights on the impacts of the proposals on fairness and complexity. Most important, we suggested ways to make the proposals more effective. Congressional staffers consulted with us as they incorporated our ideas into the final bill and have continued to seek data and input on legislative proposals. When the administration released its 2010 budget, we created an online guide to the tax proposals, providing detailed commentary on key provisions. Bill Gale and Alan Auerbach presented a "shadow budget" of more realistic projections over the 10-year and long-term horizon that was cited frequently by the news media. Later in the year, Bill and Alan evaluated the economic effects of stimulus options at the Federal Reserve’s annual conference in Jackson Hole. While saving the economy and the financial system occupied most of the policy space in Washington, many other issues were front and center. Our commentary, testimony, and analysis of ways to pay for health care reform helped inform the contentious and ongoing policy debate. We showed how to simplify and improve the complicated and sometimes contradictory rules low- income families face when trying to claim tax credits. And we worked hard to educate policymakers on the merits of using carbon taxes to address climate change. Although policymakers were busy with a host of nontax issues, we were pleased and honored to host separate events featuring Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI), each of whom presented his proposal for sweeping reform of the federal tax system and addressed audience questions as part of our Tax Reform 2.0 series. The integration of analysis and outreach efforts has always been a TPC hallmark. This year, our scholars testified before Congress on issues ranging from the nation’s fiscal challenges to the use of a carbon tax to address climate change and a dramatic new proposal to use a value-added tax to pay for universal health care coverage. We hosted 16 public forums where the nation’s leading experts discussed everything from corporate taxes to taxation of families with children to long-term care. TaxVox, named one of the country’s top economic blogs by The Wall Street Journal, has become a go-to forum on critical tax and fiscal policy, receiving almost 2.5 million page views in 2009. We are proud to have expanded our role in 2009 as a critical resource for nonpartisan, objective, timely, and careful tax policy analysis. As in the past, the news media magnified the reach of our analysis and commentary. Other nonprofits and advocacy organizations spanning the political spectrum used and cited our analysis to strengthen their cases. As the country’s challenges grow, we expect TPC to have many more opportunities to illuminate and contribute to the policy debate. None of this could have happened without the continuing dedication of TPC staff. We experienced several important personnel changes during the year. Len Burman left his position as TPC director to become the first Daniel Patrick Moynihan Professor of Public Affairs at Syracuse University. Len maintains close ties with TPC. We are indebted to Len for his creative, energetic, and visionary leadership of TPC over many years. Rosanne Altshuler replaced Len as TPC director, joining us from Rutgers University. Rosanne’s background in both academia and public policy and her great enthusiasm for TPC’s mission have made the transition seamless and productive. Our roster of experienced and committed staff grew as we welcomed back co-founder Eugene Steuerle and brought in two additional scholars. Ted Gayer is co-director of the Economic Studies program and the Joseph A. Pechman Senior Fellow at the Brookings Institution, where he focuses on taxes, housing, and climate change issues. He is also coauthor, with Harvey Rosen, of a popular undergraduate public finance textbook. Joe Rosenberg, who joined TPC from UC- Berkeley, focuses on tax and fiscal policy options, using our microsimulation federal tax model. Our crew expanded even further with the visits of two distinguished professors who spent their sabbaticals with us. Daniel Halperin from Harvard Law School and Lawrence Lokken from the University of Florida’s Levin College of Law added a legal perspective to our analyses and contributed thought-provoking posts to TaxVox. At TPC, we see ourselves as the policy equivalent of nautical chartmakers. We use our microsimulation model and analytical skills to map tax policy’s dangerous shoals. We point lawmakers and opinion shapers to the most direct route to their economic goals. And our communications tools— our website, our TaxVox blog, and our public events—are lighthouses that warn of trouble ahead and help show the way to safe passage. And, even though as upstanding tax professionals we don't party like sailors, we do manage to have a lot of fun in the process. We are extremely grateful for your continued interest in our work. Rosanne Altshuler William Gale Table of Contents 2 Letter from the Directors 5 Productivity at a Glance, 2009 6 Obama Takes the Helm 7 Fiscal Shoals Ahead 8 Reform on the Horizon 12 Charting the Seas 14 Safety Net 16 Anchors TPC microsimulation model, TaxVox, TPC website, public forums,e-mail newsletters, media coverage,social networking 18 Partners 18 On the Horizon in 2010 19 Treasures 20 Staff 22 Advisors 23 Communication Products Congressional testimony, research publications, opinion editorials,TaxVox articles 30 Leveraging TPC Analysis Productivity at a Glance, 2009 56 discussion papers, research reports, policy briefs, articles, and commentaries Research and 4 testimonies before Congress Testimony 212 TaxVox blog entries 15 public policy symposia attracting 4,200 guests (in person or via webcast) Public Outreach 2.42 million page views of TaxVox blog, almost 150 percent more than in 2008 508 distributional and revenue estimates Model Development 2 complete model updates Featured in almost 700 major media articles, 14 Media network television news programs, and 29 radio programs 1 million unique visits Website 7 million web hits 5 Obama Takes the Helm President Obama ran his presidential campaign the proposals, provided links to more detailed on a platform of change. He presented a commentary on key provisions, and comprehensive tax plan to raise taxes on high- showcased our distributional analyses of the income taxpayers and provide tax cuts for low- overall budget and its major components. The and middle-income households. In the last report—part of a “2010 Budget” Tax Topics month of the campaign, candidate Obama page on our website—remains a useful guide offered specific tax-related proposals to to tax policy issues. address some of the problems created by the Along with print, broadcast, and web- rapidly worsening economy. One of TPC’s based media, Capitol Hill found our budget most downloaded publications in 2009, tool right on the money. Our staff was invited President-Elect Obama’s Tax and Stimulus to brief members’ legislative aides as well as Plans, examined the possible effects of the tax the tax staff of the Senate Finance Committee. and stimulus plans Obama offered during his We recently released a similar web resource campaign. for the 2011 budget. As soon as he assumed office, President Obama began laying the groundwork for an economic stimulus plan. TPC’s timely analysis helped set the course. We created the Tax Stimulus Report Cards, the first comprehensive analyses of the stimulus "The poor spend almost all additional money initiatives that were working their way through that they have coming in. They have lots and Congress. These web resources described how lots of needs, relative to their incomes. They the House and Senate plans would change need every dollar they can have, and a new current tax law and analyzed how their dollar in the door goes out pretty quickly." provisions would affect the budget and the Roberton Williams, “What's In the Stimulus for economy. We estimated how each proposal’s Workers,” by Nancy Cordes, CBS Evening News, benefits would be distributed among taxpayers February 12 in different economic situations, gave each provision a grade and, most important, suggested ways to improve the proposals. We developed three report cards: one for the House bill, one for the Senate bill, and one “Anyone looking for useful information on the for the final bill, the American Recovery and House and Senate economic stimulus bills to Reinvestment Act of 2009. In response, answer the all-important question: will they congressional staff contacted us to learn more actually work to jump-start the economy? about how to improve provisions that received should refer to the Tax Policy Center’s ‘Tax low grades.